1984 (3) TMI 217 - AT - Income Tax

Adventure In The Nature Of Trade, Manufacture And Sale, Purchase And Sale, Revenue Expenditure

Summary

Issues:
Jurisdiction of assessment under section 147(b) of the Income-tax Act, 1961 based on a direction by the AAC in the first appellate order for the assessment year 1977-78.

Analysis:
The assessee contended that the assessment framed by the ITO under section 147(b) was without jurisdiction as it relied on a direction by the AAC in the first appellate order for the assessment year 1977-78, which was deemed invalid. The AAC directed the ITO to exclude the income from the assessment for 1977-78 and to tax the profit for 1978-79. The ITO initiated proceedings under section 147(b) for 1978-79 and made a reassessment based on the AAC's direction. The assessee challenged this reassessment, arguing that the direction by the AAC was beyond jurisdiction and legally invalid. The AAC upheld the validity of the assessment based on the provisions of section 150 of the Act, leading to the appeal before the ITAT.

The crux of the issue revolved around whether the AAC had the jurisdiction to issue the direction for assessing the profit under section 41(2) for 1978-79 while disposing of the appeal for 1977-78. The ITAT analyzed the Supreme Court's rulings on the meaning of 'finding' and 'direction' in the context of assessments. It was established that a finding necessary for the disposal of an appeal must be directly involved in the case, while an incidental finding may not be necessary for the disposal. The ITAT applied this legal principle to determine if the AAC's finding that the profit was assessable for 1978-79 constituted information for the ITO to have reason to believe income had escaped assessment under section 147(b).

The ITAT further delved into the definition of 'information' in section 147(b) as derived from the Supreme Court's rulings, emphasizing that decisions of superior authority under the Act constitute information relating to law for reopening assessments under section 147(b. In this case, the AAC's finding on the correct legal position regarding the sale of the truck and the profit arising in the relevant accounting year for 1978-79 was deemed as information for the ITO to initiate assessment proceedings under section 147(b. Consequently, the ITAT upheld the validity of the reassessment based on the AAC's direction, dismissing the appeal and confirming the order.

In conclusion, the ITAT's detailed analysis focused on the jurisdictional aspects of the assessment under section 147(b) and the legal implications of the AAC's direction in light of relevant legal precedents and definitions. The judgment clarified the role of findings, directions, and information in the context of reassessment proceedings, ultimately affirming the validity of the reassessment based on the AAC's direction.